Explosive Growth Ahead

Over the next five years, sales across the semiconductor supply chain will double from $2 trillion to $4 trillion, said Ajit Manocha, president and CEO of SEMI, during the opening presentation at Semicon West this month. These are gigantic numbers, and they reflect some massive shifts now underway across the semiconductor industry.

Many chipmakers have been trying to figure out the next big thing—a successor to the smart phone revolution, which succeeded the PC revolution before that, and the minicomputer revolution before that. What is becoming obvious is there is no single next big thing. There are many of them, including IoT, IIoT, augmented/virtual reality, AI/machine learning, health-care, automotive, and 3D printing. These markets have no precedent in electronics, which means all growth is new and not built on some previous architecture. The result is that no company has an unassailable lead position, and no one can sit back and rest on previous successes.

This is obvious in the automotive segment, which was considered impenetrable to outside companies for many years. The U.S. car industry was often referred to as the Big Three—GM, Ford and Chrysler. The genius of Tesla was to approach the market differently, creating electric vehicles rather than trying to compete on price or horsepower or gas mileage. The falling price of gasoline is a testament to the increase in electric and partially electric vehicles, which allowed governments to enact more stringent air quality regulations. There are efforts underway in India, France, Britain, Norway to ban new gasoline and diesel car sales altogether by 2025, and California’s emissions requirements require at least some hybrid technology to be rolled out by 2025, when minimum fuel economy for new cars will have to be at least 54.5 miles per gallon.

Carmakers’ answer to Tesla has been to roll out their own electric vehicles while pushing for more driver-assistance and ultimately self-driving features. Tesla is still at the front of that pack, but from the semiconductor industry’s standpoint, the more the better. There is no shortage of opportunities in the ADAS world, and considering that most experts put full autonomous driving at least 15 to 20 years out, this is going to be a long-running opportunity for many companies.

Then there is China, which is a huge opportunity unto itself. There were 24 new fab announcements last year in China. Investment capital continues to pour into that market from within China, setting the stage for China to become a major contributor to the global semiconductor market. Considering that China has 1.379 billion people within its borders, and an estimated one-fifth of those have taken part in the electronics revolution so far, this is a huge growth opportunity for the entire world.

Consistent with all of this growth, at least 15 IC companies are making capital expenditures of $1 billion or more, according to SEMI’s Manocha. And that comes on top of what is expected to be double-digit revenue growth for the semiconductor industry this year.

While markets ultimately will undergo consolidation as the number of companies seeking a piece of these opportunities reaches flood stage, particularly when some architectures and technology approaches win out over others, this isn’t a one-market or one-hit wonder. We are standing at the beginning of the biggest boom in technology in general, and semiconductors in particular. There are more new market opportunities and more regions in the world with economies capable of buying this technology than at any point in the past. And there is enough work, as well as enough interesting engineering challenges, to keep everyone fully employed for many years to come—at least twice over the next five years as today.

Ed Sperling

1 comments

The big shift in cars is car as a service, the day full autonomy becomes legal, everything turns upside down.

As for electric vs ICE, can someone explain how any car maker expects to be selling ICE or hybrid? Cost crossover will be reached soon and battery costs will keep declining.On top of that, electric benefits from cheaper fuel and is more reliable while being a better product- instant torque, lower noise, larger crumple zones, more freedom for aerodynamics, lower center of gravity, the ability to refuel at home.
Charging time during long trips might become irrelevant very soon, let’s see tomorrow if Tesla has news on that during their Model 3 event and if not, others will have 350kW solutions soon and that’s plenty fast, one more significant step forward would fully solve the issue.

But car as a service is the big shift and almost all car makers will go under in the first 5 years after CaaS becomes legal in major jurisdictions.